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DATA INPUT
Overhead cost per machine hour $48
Fixed manufacturing overhead $30
Machine hours limit 50,000
Blender Food Processor
Direct Material 18$ 33$
Direct Labor 12$ 27$
Manufacturing overhead 48$ 96$
Cost if purchased from outside supplier 60$ 114$
Annual Demand (units) 20,000 28,000
SOLUTION
1. Blender Food Processor
Unit cost if purchased from outside supplier 60$ 114$
Incremental cost if manufactured:
Variable overhead
$48 - $30 per hour fixed 18$ -$
(
Therefore each machine hour devoted to the production of Blender saves the company more than a
machine hour devoted to
Food Processor
production
Conclusion:
Manufacture 20,000 blenders
